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Dividend tax, at the rates that changed in April
10.75%, 35.75% and 39.35% for 2026/27. Enter your salary as well, because dividends are taxed on top of it, and the split is what decides the rate.
- 10.75%basic rate
- 35.75%higher rate
- 39.35%additional rate
2026/27 rates. Assumes England, Wales or Northern Ireland for the income tax bands, £500 of dividend allowance used, and a personal allowance of £12,570. Scottish taxpayers pay Scottish rates on salary but these same UK rates on dividends. National Insurance is not included, because dividends do not attract it. An estimate to plan with, not a return to file.
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The band between £100,000 and £125,140
There is a stretch of income where the next pound of dividend costs more than half of itself, and the rate card does not mention it anywhere.
Above £100,000 of total income the personal allowance starts to disappear, at £1 for every £2 you earn over the line. Take another pound of dividend and two things happen: the pound is taxed, and 50p that your allowance was sheltering becomes taxable as well.
On a typical director’s split, a small salary and the rest as dividends, that makes the next pound cost 58.25p rather than the 35.75p on the rate card. It runs until the allowance is fully gone at £125,140, and then the rate drops back. The band is genuinely more expensive than the one above it, which is the same shape as the 26.5% band in corporation tax and catches people out for the same reason.
It matters because the timing of a dividend is one of the few things a director genuinely controls. Declaring the same money across two tax years instead of one can be the difference between paying the headline rate and paying this one.
What this does not cover
- National Insurance. Dividends do not attract it. Your salary does, and that is not calculated here.
- Whether the dividend is lawful.A dividend can only be paid out of distributable profits, with the paperwork to match. A payment that fails that test is a director’s loan, taxed quite differently.
- Corporation tax. Dividends come out of profit after it, so the company has already paid on the same money.
- Anything requiring advice. This is an estimate for planning a decision, not a return. Your accountant files.
Related
Dividends are paid from profit after corporation tax, so the two bills are the same decision seen from either end: work out corporation tax and the 26.5% marginal band. If the constraint is cash arriving rather than tax leaving, interest on an overdue invoice or a business account.
Frequently asked questions
10.75% for basic rate taxpayers, 35.75% for higher rate and 39.35% for additional rate. The first £500 of dividends is covered by the dividend allowance and taxed at nothing. These rates rose in April 2026, so a calculator still showing 8.75% and 33.75% is working from the previous tax year.
It depends on your other income, because dividends are taxed on top of it. With no other income at all, your £12,570 personal allowance covers the first slice and the £500 dividend allowance covers the next, so £13,070 arrives untaxed. On a typical director’s salary set at the personal allowance, only the £500 is left, and everything above it is taxed.
No, and this is the detail that catches people. The £500 is taxed at 0%, but it still uses up part of your basic rate band. Treating it as a deduction understates the bill for anyone sitting near a threshold, because it does not push the higher rate band upward by £500.
Because of the personal allowance taper. Once your total income passes £100,000 you lose £1 of personal allowance for every £2 above it, so an extra pound of dividend both gets taxed itself and exposes 50p that was previously sheltered. Between £100,000 and £125,140 that pushes the true cost of the next pound well above the headline rate, and the calculator shows the figure for your own numbers.
No. That is the reason a director’s pay is often split between a small salary and dividends: salary attracts National Insurance from both the individual and the company, and dividends attract none. Dividends are paid out of profit after corporation tax, though, so the comparison is never as one-sided as the National Insurance saving alone suggests.
No. Income tax on earnings is devolved and Scottish rates and bands apply to salary, but dividend tax is not devolved, so the UK rates here apply wherever in the UK you live. What does change is which band your dividends land in, because your Scottish-rate salary is still what fills the bands underneath them.
Through self assessment, by 31 January after the end of the tax year. If the bill is large enough you will also be asked for payments on account, which are two instalments toward the following year’s tax. The first one falls on the same 31 January date, which is what makes an unplanned dividend bill land harder than expected.
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